SVKM’s NMIMS

Anil Surendra Modi School of Commerce

Programme: B.Com. Hons. Batch: 2018 - 2021

Academic Year: 2020 – 2021 Subject: Management Accounting
Date: 5 January 2021

N.B.:-

1.    There are five questions in this paper.  All questions are compulsory.

2.      Each question carries10 marks. Question number 2 has two parts viz a and b of 5 marks

3.      Each question has been provided in the designated excel sheet for that question.

4.      Use of Ordinary / Scientific calculators and this excel workbook is allowed.

5.      Access to Internet sites, other than those required to conduct exam are prohibited.
 ommerce

Semester: III
Marks: 50
Time: 12:30 pm to 02:45 pm

compulsory.

two parts viz a and b of 5 marks each.

l sheet for that question.

workbook is allowed.

nduct exam are prohibited.

 Question 1

Prepare flexible budgets for 35%, 40% and 45% capacity

levels with the data given for 40% capacity level.
Particulars Amount in Rupees PARTICULARS
Variable overheads:
Indirect labour 24,000 INDIRECT LABOUR
Stores 8,000 STORES
Semi-variable overheads:
Power (30% fixed) 40,000 SEMI VARIABLE OH
Repair and maintenance (40% variable) 4,000 POWER
Fixed overheads: REPAIR
Depreciation 22,000
Insurance 6,000 FOH
Salaries 20,000 DEPRECIATION
INSURANCE
SALARIES

TOTAL

N
POWER

REPAIRS
 BUDGETS
PARTICULARS 35% 40% 45%

INDIRECT LABOUR 21000 24000 27000

7000 8000 9000

SEMI VARIABLE OH
(NOTE 1) 36500 40000 43500
(NOTE 2) 3800 4000 4200

DEPRECIATION 22000 22000 22000

INSURANCE 6000 6000 6000
SALARIES 20000 20000 20000

116300 124000 131700

NOTE 1
AT 40% POWER = 40000
THEREFORE
FIXED =12000
VARIABLE = 28000

AT 35% VARIABLE : 24500

AT 45% VARIABLE: 31500

NOTE 2
REPAIRS AT 40% REPAIR =4000
THEREFORE
FIXED = 2400
VARIABLE = 1600
 Question 2 a
A Company provides the following data:

Amount in Rupees
Year
Sales Costs
2019 7,000,000 5,800,000
2020 9,000,000 6,600,000

Calculate for each year:

1. P /V ratio.
2. Variable Costs
3. Fixed costs
4. BEP
Year
5. Budgeted profit, if budgeted sales for the year were Rs:- 2019 2020
10,000,000 12,000,000
 Amount in Rupees
Year
Sales Costs PROFIT
2019 7,000,000 5,800,000 1,200,000
2020 9,000,000 6,600,000 2,400,000

1 P.V.RATIO = CHANGE IN PROFIT /CHANGE IN SALES *100

60 60%

2 VARIABLE COST

SINCE PV RATIO = 60%

THEREFORE VARIABLE COST RATIO = 40%

2019's VARIABLE COST 2,800,000

2020's VARIABLE COST 3,600,000

3 FIXED COST = TOTAL COST - VARIABLE COST

2019 3,000,000
2020 3,000,000

4 BEP = FIXED COST / PV RATIO

5,000,000

5 BUDGET PROFIT
2019 2020
SALES 10,000,000 12,000,000
VC
CONTRIBUTION 6000000 7200000
( FIXED COST) -3000000 -3000000

PROFIT 3000000 4200000

 Question 2 b

ACC ltd. fixes the inter-divisional transfer prices for

its products on the basis of cost, plus a return on
investment in the division. The details regarding
Division X for 2019-20 appears as under:

Particulars Rs.
Investments in Fixed Assets 1000000
Investments in Debtors 500000
Investments in Other Current Assets 300000
Annual fixed cost of the dlvision 800000
Variable cost per unit of product 15
Budgeted annual volume in units 500000
Desired Return on Investment (ROI) 20%

Determine the transfer price for Division X.

PARTICULARS

VARIABLE COST 15
FIXED COST (800000/50000) 1.6
TOTAL COST 16.6
ADD: DESIRED RETURN 0.72

TRANSFER PRICE (FOR X) 17.32

 Question 3

Green Kamal Ltd. manufactures three different types of

furniture products – chairs, benches and tables. The
budgeted unit cost and resource requirements of each item
are detailed below:
Amount in Rupees
Paticulars
Chair Bench Table
Timber cost 5.00 15.00 10.00
Direct labour cost 4.00 10.00 8.00
Variable overhead cost 3.00 7.50 6.00
Fixed overhead cost 4.50 11.25 9.00
Selling Prices 20.00 50.00 40.00

Quantitative Details for the year are as under:-

No. of Units
Paticulars
Chair Bench Table
Budgeted Volumes 4000 2000 1500
Minimum Commitment 500 100 150

Additional information is as under:-

Particulars Rupees
Cost of Timber Per Square Meter 2.00
Labour Rate
Financial Per Hour
Pentaly if minimum commitment is 4.00
not honoured 2000.00
Square Meters of Timber Available for the
Year 20000

Determine the optimum production plan and state the net

profit that this should yield per annum.
PARTICULARS CHAIR BENCH TABLE

SELLING PRICE 20 50 40
LESS : VARIABLE COSTS
TIMBER COST 5 15 10
DIRECT LABOUR COST 4 10 8
VARIABLE OVERHEAD COST 3 7.5 6
CONTRIBUTION P.U 8 17.5 16
TIMBER USED/ SQ MTR 2.5 7.5 5
(TOTAL COST / COST PER SQ MTR)

CONTRIBUTION P.U OF TIMBER 3.2 2.33 3.2

SINCE CONTRIBUTION OF CHAIR AND LABOUR ARE SAME WE CAN FIND CONTRIBUTION P

LABOUR HR PER UNIT 1 2.5 2

CONTRIBUTION P.U OF LABOUR HR 8 7 8

SINCE CONTRIBUTION PER LIMITING FACTOR OF CHAIR AND TABLE BOTH ARE SAME IN B

CALCULATION OF OPTIMUM PRODUCTION

TOTAL SQ MTR OF TIMBER AVAILABLE = 20000

MAXIMUM TINDER FOR PRODUCTION OF BENCH

750
NOW TOTAL TIMBER LEFT 19250

THIS WILL BE USED FOR PRODUCING CHAIRS AND TABLES

MAX PRODUCTION OF CHAIR = 4000 UNITS

TIMBER REQUIRED PER UNIT 2.5
TOTAL TIMBER REQ 10000

TIMBER LEFT = 9250

TIMBER REQ FOR PRODUCTION OF TABLE = 5

TOTAL PRODUCTION = 1850

OPTIMUM PRODUCTION MIX = 4000 UNITS OF CHAIRS

1850 UNITS OF TABLE
100 UNITS OF BENCH

CALCULATION OF NET PROFIT

PARTICULARS UNITS CONTRIBUTION P.U. TOTAL CONTRIBUTION

CHAIRS 4000 8 32000

BENCH 100 17.5 1750
TABLES 1850 16 29600

TOTAL 63350

LESS : FIXED COST

CHAIR -18000
BENCH -1125
TABLE -16650 -35775

PROFIT 27575
D CONTRIBUTION PER LABOUR HR RATE TO CHECK WHICH IS BETTER AMONG THEM

OTH ARE SAME IN BOTH CASES NOW WE WILL CHECK FIXED COST PER UNIT AND SINCE FIXED COST PER UN
IXED COST PER UNIT OF CHAIR IS LESS WE WILL PRODUCE CHAIR FIRST
 Question 4
A book publishing company prints limited edition life books with production runs of 15,00
system to assign manufacturing overheads to products. The following information is avail

Statement Showing Details of Product Named 'Art of Life'

Annual Production In Units
Direct Material Cost Per Unit In Rupees
Direct Labour Cost Per Unit In Rupees

Statement Showing Detais of Manufacturing Overhea

Cost Pool Cost (in Rs.)
Materials ordering 840000
Materials Inspection 525000
Equipment set up 2500000
Quality control 1000000
Other 20000000
Total manufacturing overheads 24865000

Calculate:
a.       Overhead rate per unit of activity for each of the five cost pools. (2 Marks)
b.       Total overhead assigned to the production of the Art of Life (round your answer to
c.       Overhead cost per unit for the Art of Life. (2 Marks)
d.       Total unit cost for Art of Life. (2 Marks)
e.       The overhead rate per direct labour cost and per unit overhead assigned to Art of L
traditional production volume-based method using direct labour cost as the allocation bas
 Question 4
d edition life books with production runs of 15,000 to 1,00,000. It has recently adopted an activity-based costing
ds to products. The following information is available

of Product Named 'Art of Life'

30000
35
5

ement Showing Detais of Manufacturing Overhead Cost Pools & Cost Driver
Cost Driver Driver Quanity for All Books
Number of purchase orders 120000
Number of receiving reports 2100
Number of set ups 125
Number of inspections 5000
Direct labour cost 12500000

or each of the five cost pools. (2 Marks)

duction of the Art of Life (round your answer to two decimals) (2 Marks)
of Life. (2 Marks)
arks)
r cost and per unit overhead assigned to Art of Life assuming that the printing company allocates overhead by
hod using direct labour cost as the allocation base and one cost pool. (2 Marks)
s recently adopted an activity-based costing

t Driver
Dirver Quantity for 'Art of Life'
1200
315
1
500
150000

arks)

e printing company allocates overhead by

(2 Marks)
CALCULATION OF RATE PER UNIT

A) CALCULATION OF RATE PER DRIVER

COST POOLS COST DRIVER

MATERIAL ORDERING 840000 NUMBER OF PURCHASE ORDER
MATERIAL INSPECTING 525000 NUMBER OF RECEIVING REPORTS
EQUIPMENT SETUP 2500000 NUMBER OF SETUPS
QUALITY CONTROL 1000000 NUMBER OF INSPECTION
OTHER 20000000 DIRECT LABOUR COST

B) CALCULATION OF OVERHEAD COST PER UNIT

MATERIAL HANDLING 8400
MATERIAL INSPECTING 78750
EQUIPMENT SETUP 20000
QUALITY CONTROL 100000
OTHER 240000

447150
ANNUAL PRODUCTION 30000

C) OVERHEAD COST PER UNIT 14.905

D) TOTAL UNIT COST

DIRECT MATERIAL 35
DIRECT LABOUR 5
OVERHEADS 14.91
UNIT COST 54.91

E) OVERHEAD RATE PER DIRECT HOUR

DIRECT MATERIAL 35
DIRECT LABOUR 5
OVERHEADS 8

48

OVERHEAD RATE PER DIRECT LABOUR COST = 198.92%

ALLOCATED OVERHEAD 298380

(150000*198.92%)
 RATE
ASE ORDER 120000 7 PER ORDER
VING REPORTS 2100 250 PER INSPECTING
125 20000 PER SETUP
5000 200 PER INSPECTION
12500000 1.6
 Question 5

Alok Pharmacy Ltd. is engaged in producing

preventive medicines ‘Corona Warrior’ for growing
children. It produces ‘Corona Warrior’ in a batch of
10 kgs. Standard material inputs required for 10 kgs.
of ‘Corona Warrior’ are as below:

Material Quantity (in kgs.) Rate per kg. (in Rs.)

X 5 110
D 3 320
L 3 460

During the month of March, 2020, actual production

was 5,000 kgs. of ‘Corona Warrior’ for which the
actual quantities of material used for a batch and the
prices paid thereof are as under:

Material Quantity (in kgs.) Rate per kg. (in Rs.)

X 6 115
D 2.5 330
L 2 405

You are required to calculate the following variances

based on the above given information for the month of
March, 2020 for Alok Pharmacy Ltd.:

(i)                 Material Cost Variance;

(ii)               Material Price Variance;
(iii)            Material Usage Variance;
(iv)             Material Mix Variance;
(v)               Material Yield Variance
1

3
 MATERIAL SQ*SP AQ*AP RSQ*SP

X 275000 345000 262460

D 480000 412500 458240

L 690000 405000 658720

TOTAL 1445000 1162500 1379420

FOR SQ

X 2500
D 1500

L 1500

FOR ACTUAL QUALITY OF MATERIAL USED FOR ACTUAL OUTPUT

X 3000
D 1250
L 1000

REVISED STANDARD QUANTITY

X 2386
D 1432
L 1432
MATERIAL COST VARIANCE (SQ*SP) - (AQ*AP) 2 MATERIAL PRICE VARIANCE

X -70000 (A) X -15000 (A)

D 67500 (F) D -12500 (A)
L 285000 (F) L 55000 (F)

282500 (F) 27500 (F)

MATERIAL USAGE VARIANCE SP*(SQ-AQ) 4 MATERIAL MIX VARIANCE

X -55000 (A) X -67540 (A)

D 80000 (F) D 58240 (F)
L 230000 (F) L 198720 (F)

255000 (F) 189420 (F)

5 MATERIAL YIELD VARIANCE SP*(SQ-RSQ)

X 12540 (F)
D 21760 (F)
L 31280 (F)

65580 (F)
AQ*(SP-AP)

SP*(RSQ-AQ)